Consider a manufacturing firm with a production process that relies on some technology that is inherently random. In particular, in each month, the productivity of the firm generates a baseline level of net revenue equal to 350 (in thousands of dollars). However, the actual net revenues generated vary due to the variation in output caused by the production technology. The variation can be represented as a risky lottery, P , with the resulting changes in net revenue (in thousands of dollars) as the listed outcomes, given by P= (.4, -50; .25, 10; .35, 50) (a) Show that the lottery is a zero-mean lottery -- that is, the expected variation in revenues is E(P)= 0.

Consider a manufacturing firm with a production process that relies on some technology that is inherently random. In particular, in each month, the productivity of the firm generates a baseline level of net revenue equal to 350 (in thousands of dollars). However, the actual net revenues generated vary due to the variation in output caused by the production technology. The variation can be represented as a risky lottery, P , with the resulting changes in net revenue (in thousands of dollars) as the listed outcomes, given by P= (.4, -50; .25, 10; .35, 50) (a) Show that the lottery is a zero-mean lottery -- that is, the expected variation in revenues is E(P)= 0.

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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